United States v. Under Seal

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 13-4267

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

v.

UNDER SEAL,

Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Leonie M. Brinkema,
District Judge. (1:12-dm-00020-LMB-1)

Argued: October 29, 2013 Decided: December 13, 2013

Before KING, GREGORY, and AGEE, Circuit Judges.

Affirmed by published opinion. Judge Agee wrote the opinion, in
which Judge King and Judge Gregory joined.

ARGUED: Caroline Rule, KOSTELANETZ & FINK, LLP, New York, New
York, for Appellant. Elissa Hart-Mahan, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON
BRIEF: Robert Steven Fink, Juliet Leah Fink, KOSTELANETZ & FINK,
LLP, New York, New York; David G. Barger, GREENBERG TRAURIG,
LLP, McLean, Virginia, for Appellant. Neil H. MacBride, United
States Attorney, OFFICE OF THE UNITED STATES ATTORNEY,
Alexandria, Virginia; Kathryn Keneally, Assistant Attorney
General, Frank P. Cihlar, Chief, Criminal Appeals & Tax
Enforcement Policy Section, Gregory Victor Davis, Tax Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
Appellee.

2
AGEE, Circuit Judge:

John and Jane Doe (the “Does”) appeal the district court’s

order holding them in civil contempt for refusing to comply with

grand jury subpoenas. The Does contend that the district court

erred in finding that the required records doctrine overrode

their Fifth Amendment privilege against self-incrimination and

required production of certain foreign bank records. For the

reasons that follow, we affirm the judgment of the district

court.

I.

The underlying facts in this case are undisputed. The Does

are the targets of a grand jury investigation in the United

States District Court for the Eastern District of Virginia

seeking to determine whether they used secret Swiss bank

accounts to conceal assets and income from the Internal Revenue

Service (“IRS”) and the Treasury Department. The grand jury

received evidence that on June 2, 2008, John Doe opened an

account at the Swiss investment bank Clariden Leu (now Credit

Suisse AG) in the name of [Redacted Corporation]. He was the

beneficial owner of the account, which was valued in excess of

$2.3 million at the close of 2008. The account was managed by

the Swiss firm Beck Verwaltungen AG. When John Doe closed this

account in January 2009, he transferred $1.5 million to Beck

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Verwaltungen AG’s account at a different Swiss private bank,

Bank Sarasin.

On May 18, 2012, the Does were served grand jury subpoenas

requesting that they produce certain foreign bank account

records that they were required to keep pursuant to Treasury

Department regulations governing offshore banking. The

subpoenas demanded production of

[a]ny and all records required to be
maintained pursuant to 31 C.F.R. § 1010.420
(formerly 31 C.F.R. § 103.32) for the past
five (5) years relating to foreign financial
bank, securities, or other financial
accounts in a foreign country for which you
had/have a financial interest in, or
signature or other authority over and are
required by law to file a Report of Foreign
Bank and Financial Account (FBAR). The
records required to be maintained pursuant
to 31 C.F.R. § 1010.420 (formerly 31 C.F.R.
§ 103.32) include records that contain the
name in which each such account is
maintained, the number or other designation
of such account, the name and address of the
foreign bank or other person with whom such
account is maintained, the type of such
account, and the maximum value of each such
account during the reporting period.

(J.A. 10.) The Does timely moved to quash the subpoenas, citing

their Fifth Amendment privilege against self-incrimination. The

Government opposed the motion, arguing that under the required

records doctrine, the privilege does not apply to financial

records that the Does were required by law to retain.

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 After hearing argument, the district court denied the Does’

motion to quash, finding that the required records doctrine

overrode their Fifth Amendment privilege against self-

incrimination, and ordered them to comply with the subpoenas.

The Does refused to comply, and pursuant to a stipulation by the

parties, the district court held the Does in civil contempt. 1

The Does now appeal, and we have jurisdiction pursuant to

28 U.S.C. § 1291.

II.

A.

We review the district court’s denial of a motion to quash

a subpoena for an abuse of discretion. 2 In re Grand Jury

Subpoena: John Doe, No. 05GJ1318, 584 F.3d 175, 182 (4th Cir.

2009). But “[i]nsofar as the district court’s determination was

based upon interpretations of law, . . . we review those

conclusions de novo.” In re Grand Jury Subpoena (T-112), 597

F.3d 189, 195 (4th Cir. 2010).

1
The district court stayed the execution of the contempt
order until this Court adjudicates the Does’ appeal.
2
Although the Does formally appeal the district court’s
order holding them in civil contempt, the underlying basis of
the contempt order is the court’s denial of their motion to
quash the grand jury subpoenas.

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 B.

The Bank Secrecy Act (the “BSA” or the “Act”), 31 U.S.C.

§§ 5311-25, regulates offshore banking and contains a number of

recordkeeping and inspection provisions. Among the purposes of

the BSA is “to require certain reports or records where they

have a high degree of usefulness in criminal, tax, or regulatory

investigations or proceedings.” 31 U.S.C. § 5311. Section

241(a) of the Act instructs the Treasury Secretary to “require a

resident or citizen of the United States . . . to keep records,

file reports, or keep records and file reports, when the

resident, citizen, or person makes a transaction . . . with a

foreign financial agency.” Id. § 5314(a). In furtherance of

that statutory directive, the Treasury Secretary implemented

regulations that require (1) U.S. citizens and residents to

disclose their foreign bank accounts, see 31 C.F.R. § 1010.350,

and (2) that the records for such accounts “be retained by each

person having a financial interest in or signature or other

authority over any such account” for at least five years and be

kept “at all times available for inspection as authorized by

law,” id. § 1010.420. These recordkeeping regulations were in

effect at all times relevant to this case.

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 III.

The Fifth Amendment to the United States Constitution

provides that “[n]o person . . . shall be compelled in any

criminal case to be a witness against himself.” U.S. Const.

amend. V. The Supreme Court has held that the privilege against

self-incrimination bars the government from “compelling a person

to give ‘testimony’ that incriminates him.” Fisher v. United

States, 425 U.S. 391, 409 (1976). Because “the privilege

protects a person only against being incriminated by his own

compelled testimonial communications,” the Court has determined

that it does not shield production of private papers voluntarily

prepared or prepared by a third party. Id. at 409.

The Does contend that the required records doctrine—which,

if it applies, renders the Fifth Amendment privilege

inapplicable—does not apply here and that the district court

erred in finding otherwise. Essentially, the Does argue that

“[w]here documents are required to be kept and then produced,

they are arguably compelled.” In re M.H., 648 F.3d 1067, 1071

(9th Cir. 2011) (emphasis in original). The Supreme Court,

however, has held that the privilege against self-incrimination

does not bar the government from imposing recordkeeping and

inspection requirements as part of a valid regulatory scheme.

See Shapiro v. United States, 335 U.S. 1, 17 (1948) (noting that

the nature of documents and the capacity in which they are held

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may indicate that “the custodian has voluntarily assumed a duty

which overrides his claim of privilege”).

In Shapiro, the Court required a wholesaler of fruit and

produce to turn over certain records he was obliged to keep and

maintain for examination pursuant to the Emergency Price Control

Act (“EPCA”), which was enacted during World War II to prevent

inflation and price gouging. Id. at 4–11. The Court determined

that the EPCA represented a valid exercise of Congress’

regulatory authority and that the recordkeeping provisions of

the EPCA were essential to the administration of the statute’s

objectives. Id. at 31–32. Further, the Court reasoned that

this “required records doctrine” applies “not only to public

documents in public offices, but also to records required by law

to be kept in order that there may be suitable information of

transactions which are the appropriate subjects of governmental

regulation, and the enforcement of restrictions validly

established.” Id. at 17 (emphasis omitted).

The Court revisited its decision in Shapiro twenty years

later in Marchetti v. United States, 390 U.S. 39 (1968) and

Grosso v. United States, 390 U.S. 62 (1968). In holding that

the required records doctrine was inapplicable to the

circumstances before it in both cases, the Court articulated

three requirements—derived from Shapiro’s holding—for

determining the applicability of the required records doctrine.

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As summarized in Grosso, those requirements are: (1) the

purposes of the United States’ inquiry must be essentially

regulatory; (2) information is to be obtained by requiring the

preservation of records of a kind which the regulated party has

customarily kept; and (3) the records themselves must have

assumed public aspects which render them at least analogous to a

public document. 390 U.S. at 67–68.

This Court has recognized that the foregoing three

principles announced in Grosso define the required records

doctrine, see, e.g., United States v. Webb, 398 F.2d 553, 556

(4th Cir. 1968) (recognizing required records doctrine in

context of regulation of interstate trucking), but has yet to

address the applicability of the doctrine in the context of

foreign bank records. We do so now and join the consensus of

the courts of appeals to have considered the issue that the

required records doctrine applies in concluding that records

required to be maintained under the BSA fall within the required

records doctrine. 3 We further conclude that all three

requirements of the doctrine are met in this case.

3
See, e.g., In re Grand Jury Subpoena, 696 F.3d 428, 433–34
(5th Cir. 2012); In re Special Feb. 2011-1 Grand Jury Subpoena
Dated Sept. 12, 2011, 691 F.3d 903, 909 (7th Cir. 2012); In re
M.H., 648 F.3d at 1073; In re Doe, 711 F.2d 1187, 1191 (2d Cir.
1983).

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 A.

In order to fall under the required records doctrine, the

purpose of the recordkeeping must be “essentially regulatory.”

Grosso, 390 U.S. at 68. We have held that a recordkeeping

requirement is “essentially regulatory” if it is “imposed in an

essentially noncriminal and regulatory area of inquiry and [is]

not directed to a selective group inherently suspect of criminal

activity.” Webb, 398 F.2d at 556 (internal quotation marks

omitted).

The Does argue that, for several reasons, the BSA’s

recordkeeping provision is criminal in nature, rather than

regulatory. They contend that unlike truly regulatory schemes,

such as those that condition employment or licensure on the

retention of certain records, the BSA’s purpose is

prosecutorial—i.e., to grant law enforcement access to otherwise

unavailable evidence of foreign financial transactions. The

Does cite language referring to criminal investigation as one of

the BSA’s aims in the statute’s declaration of purpose,

legislative history, and descriptions on the IRS website, to

support their position that the BSA’s recordkeeping requirements

prohibitively operate in a criminal area of inquiry against

those suspected of tax fraud. Implicit in the Does’ argument is

that because the BSA lists first among its purposes the

gathering of information that has “a high degree of usefulness

10
in criminal . . . investigations,” 31 U.S.C. § 5311, the Act’s

chief purpose is to fight crime.

These same arguments failed to persuade the other appellate

courts which have considered the issue, and do not persuade us

either. See, e.g., In re M.H., 648 F.3d at 1073–74 (noting and

rejecting party’s citations to language in the BSA and the IRS

website); In re Grand Jury Subpoena, 696 F.3d at 434–35 (same).

The Supreme Court has observed that a statute which

includes a criminal law purpose in addition to civil regulatory

matters does not strip the statute of its status as “essentially

regulatory.” See Cal. Bankers Ass’n v. Shultz, 416 U.S. 21, 77

(1974) (“[T]hat a legislative enactment manifests a concern for

the enforcement of the criminal law does not cast any

generalized pall of constitutional suspicion over it.”).

Notwithstanding their own argument, the Does acknowledge that

the BSA has purposes unrelated to criminal investigation. The

plain language of the BSA verifies its concomitant tax,

regulatory, and counterterrorism purposes in addition to its law

enforcement goals. See 31 U.S.C. § 5311 (requiring records to

be kept “where they have a high degree of usefulness in

criminal, tax, or regulatory investigations or proceedings, or

in the conduct of intelligence or counterintelligence

activities, including analysis, to protect against international

terrorism” (emphasis added)). Elaborating on the non-criminal

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purposes of the BSA, the relevant House Report acknowledges that

the Act’s recordkeeping and reporting requirements “aid duly

constituted authorities in lawful investigations” but also

underscores that the requirements “facilitate the supervision of

financial institutions properly subject to federal supervision”

and “provide for the collection of statistics necessary for the

formulation of monetary and economic policy.” H.R. Rep. No. 91-

975 (1970), reprinted in 1970 U.S.C.C.A.N. 4394, 4405.

Consequently, the Treasury Department shares the information it

collects pursuant to the requirements of the BSA with other

agencies—including the Office of the Comptroller of the

Currency, the Consumer Financial Protection Bureau, the Federal

Reserve Board, the Federal Deposit Insurance Corporation, the

National Credit Union Administration, and the Office of Thrift

Supervision—none of which are empowered to bring criminal

prosecutions. See 31 U.S.C. § 5319; 31 C.F.R. § 1010.950(a)-

(b).

Further, the Supreme Court has noted, in discussing “the

recordkeeping and reporting requirements of the [BSA],” that

“Congress seems to have been equally concerned with civil

liability which might go undetected by reason of transactions of

the type required to be recorded or reported.” Schultz, 416

U.S. at 76. Indeed, the BSA’s comprehensive statutory scheme

contains recordkeeping requirements that carry both civil and

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criminal penalties. See 31 U.S.C. §§ 5321, 5322 (individual’s

failure to report or retain required records of foreign bank

accounts does not give rise to criminal liability unless that

failure is proven “willful”). 4

Additionally, the BSA’s recordkeeping requirements broadly

cover all those who maintain foreign bank accounts, rather then

a particular subgroup. The Ninth Circuit has explained:

There is nothing inherently illegal about
having or being a beneficiary of an offshore
foreign banking account. According to the
Government, § 1010.420 applies to “hundreds
of thousands of foreign bank accounts—over
half a million in 2009.” Nothing about
having a foreign bank account on its own
suggests a person is engaged in illegal
activity. The fact distinguishes this case
from Marchetti and Grosso, where the
activity being regulated—gambling—was almost
universally illegal, so that paying a tax on
gambling wagers necessarily implicated a
person in criminal activity. Admitting to
having a foreign bank account carries no
such risk. That the information contained
in the required record may ultimately lead
to criminal charges does not convert an
essentially regulatory regulation into a
criminal one.

In re M.H., 648 F.3d at 1074–75.

Moreover, § 1010.420 has a reporting requirement. The

regulation mandates that the required records “shall be kept at

all times available for inspection as authorized by law.” 31

4
31 U.S.C. § 5321 permits the Secretary of Treasury to
commence civil actions to recover monetary penalties for various
violations of the BSA.

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C.F.R. § 1010.420. The Supreme Court has indicated that “no

meaningful difference” exists “between an obligation to maintain

records for inspection, and such an obligation supplemented by a

requirement that those records be filed periodically with

officers of the United States.” Marchetti, 390 U.S. at 56 n.14.

Because the BSA’s recordkeeping requirements serve purposes

unrelated to criminal law enforcement and the provisions do not

apply exclusively to those engaged in criminal activity, we find

that those requirements are “essentially regulatory.”

Accordingly, we conclude that the first prong of the required

records doctrine is satisfied.

B.

The records must also be “of a kind which the regulated

party has customarily kept.” Grosso, 390 U.S. at 68. We find

this prong of the required records doctrine to be easily

satisfied here. The records sought are of the same type that

the Does must report annually to the IRS pursuant to the

regulation of offshore banking: the name, number, and type of

account(s), the name and address of the bank where an account is

held, and the maximum value of the account during the reporting

period. See 31 C.F.R. §§ 1010.350, 1010.420.

Furthermore, the records sought are also of the same type

that a reasonable account holder, foreign or domestic, would

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keep in order to access his or her account. See In re M.H., 638

F.3d at 1076 (reasoning that foreign account holders routinely

retain basic foreign bank records if only to access their own

accounts). The Does argue that individuals are unlikely to keep

account records for the five years required under 31 C.F.R.

§ 1010.420, given the three-year statute of limitations for

civil tax adjustments, and because foreign banks are notorious

for failing to provide customers with records. This argument

fails, however, given the clear language in § 1010.420 that

requires the retention of the account information that has been

subpoenaed. 5 Because it is the failure to maintain such records

that can be probative of criminal activity, rather than the

contents of the records, foreign account holders can reasonably

be expected to follow the law governing their choice to engage

in offshore banking.

Accordingly, we conclude that the records sought are of a

kind “customarily kept” and the second prong of the required

records doctrine is satisfied.

5
We also find the Does’ five-year argument dubious in view
of 26 U.S.C. § 6501(e), which contains a six-year statute of
limitations for many taxpayers and fosters a generally accepted
accounting practice to advise taxpayers to keep their pertinent
records until the § 6501(e) period has expired.

15
 C.

Finally, “the records [sought] must have assumed ‘public

aspects’ which render them at least analogous to public

documents.” Grosso, 390 U.S. at 68. Two courts of appeals have

held that “if the government’s purpose in imposing the

regulatory scheme is essentially regulatory, then it necessarily

has some ‘public aspects’” sufficient to satisfy the third prong

of the required records doctrine. In re M.H., 638 F.3d at 1076

(citing Shapiro, 335 U.S. at 33); accord Donovan v.

Mehlenbacher, 652 F.2d 228, 231 (2d Cir. 1981). For purposes of

this case, we agree.

Drawing a distinction between entities and individuals who

publicly engage in business with the public and those who

privately open a foreign bank account, the Does contend that

there is “nothing public about the unlicensed private activity

of owning a foreign bank account.” (Appellant’s Br. 49.) The

Does argue that the subpoenaed records are private, personal

financial records which are unrelated to legitimate regulatory

goals.

This argument by the Does misapprehends this prong of the

required records doctrine by conflating “public aspects” and

“public access.” Although the Does argue that substantive

regulations designed to protect the public from harm and open to

public access may imbue otherwise private documents with public

16
aspects, it does not follow that public aspects exist only under

these circumstances. That the records sought are typically

considered private does not bar them from possessing the

requisite public aspects. See In re M.H., 648 F.3d at 1077

(“[T]hat the information sought is traditionally private and

personal as opposed to business-related does not automatically

implicate the Fifth Amendment.”); In re Kenny, 715 F.2d 51, 52–

54 (2d Cir. 1983) (reasoning that subpoenaed medical records

possessed sufficient “public aspects” to satisfy the third prong

of the required records doctrine). As discussed above, the

Treasury Department shares the information it collects pursuant

to the Act’s recordkeeping and reporting requirements with a

number of other agencies. See 31 U.S.C. § 5319; 31 C.F.R.

§ 1010.950(a)-(b). This data sharing is designed to serve

important public purposes, including the formation of economic,

monetary, and regulatory policy, any of which are more than

sufficient to imbue otherwise private foreign bank account

records with “public aspects.” See In re Grand Jury Subpoena,

696 F.3d at 436.

Finally, the Does contend that a requirement to retain

records begets a more attenuated relationship with the

government than a requirement to report their contents, such

that documents maintained under a mere recordkeeping requirement

have insufficient “public aspects.” The Supreme Court, however,

17
has squarely rejected this proposition. See Marchetti, 390 U.S.

at 56 n.14 (“We perceive no meaningful difference between an

obligation to maintain records for inspection, and such an

obligation supplemented by a requirement that those records be

filed periodically with officers of the United States.”). We

therefore conclude that the records in question have “public

aspects” sufficient to satisfy the third prong of the required

records doctrine.

IV.

Because we find that the records sought in the grand jury

subpoenas meet all the requirements of the required records

doctrine, the Fifth Amendment privilege is inapplicable, and the

Does may not invoke it to shield themselves from the subpoenas’

commands. As the Does’ Fifth Amendment privilege is not

implicated, we need not address their request for immunity.

Accordingly, the judgment of the district court is

AFFIRMED.

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